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Fleet industry slams diesel tax U-turn as stakeholders go back to the drawing board

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A Government U-turn on company car tax has angered the fleet industry, reports Fleet News.

The existing 3% diesel surcharge on company cars was expected to be axed from April 2016, but is now set to remain for another five years, until 2021, as revealed in Chancellor George Osborne's recent Budget Statement.

Osborne explained that the move is due to "slower-than-expected introduction of more rigorous EU emissions testing".

Car fuelling with dieselHowever, the industry is questioning whether air quality is the real motivation for the turnabout, since the decision is expected to raise an extra £1.4 billion in taxes over the next five years.

Not only will the extension of the tax affect company car choice lists, which are based on whole life costs, it could also penalise fleet drivers, warns Fleet News.

Matthew Walters, head of consultancy services at LeasePlan UK, complained: "Our industry has sought certainty about future tax year liabilities – which Government has provided – yet this has been done with no advance notification, and with no grandfathering for those affected individuals who have already made what they thought was an informed choice based on future years."

Meanwhile, John Pryor, chairman of fleet operators' association the ACFO, said: "ACFO has been consistent in its call for clarity and long-term decision-making, so that fleets and company car drivers could plan for the future in full knowledge of what the tax burden will be.

"This Government U-turn does not assist that process."

Company car drivers will be expected to pick up the tab for the delay in removing the supplement through additional benefit-in-kind tax, while employers will also contribute through increased Class 1A national insurance contributions.
As many as four out of five company car drivers will be affected, Lex Autolease has estimated – or the equivalent of 750,000 employees (based on the latest figures from HMRC).
Tony Greenidge, sales and marketing director for fleet management specialist Fleet Operations, said: "With this announcement, fleet stakeholders spread across many functions such as HR and procurement now face the dilemma of either absorbing this unexpected cost or amending choice lists to take the extended supplement into consideration."

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